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The banks, which the Treasury did not name but soon identified themselves publicly, were among the hundreds of companies that received a lifeline through the government’s $700 billion Troubled Asset Relief Program created by Congress last October at the height of the financial emergency.
As the worldwide financial situation shows signs of stabilizing, the U.S. banks have been eager leave the TARP program to escape strict government restrictions such as limits on executive compensation.
But the banks’ move holds some risk for taxpayers. The government is leaving some its credit support programs in place, even for banks that repay funds, while forgoing interest payments on the initial loans. That means taxpayers could still be left accountable for potential losses.
At the same time, banks seeking to free themselves from government interference will soon be faced with potentially dramatic reform, even if they return billions in TARP money. The Obama administration is developing proposals to regulate executive compensation at financial firms and to overhaul the way such firms are regulated, two developments that could radically change the way banks operate.
The banks are expected to repay the government funds in full with accrued dividends, though the timeline and the final payment amount is not clear. Here are details about what the banks say they are paying back and how it will affect their business:
JPMorgan Chase & Co.
TARP Funds Received and Paying Back| $25 billion
Company Statement | “Paying back TARP at this time is the right thing for JPMorgan Chase, and it’s the right thing for our country,” CEO Jamie Dimon said, adding, “We feel it’s best for our government to be able to use these funds for other critical purposes.”
The bank said it loaned more than $150 billion in the first quarter to consumers, small businesses, non-profits, municipalities, corporations and others, including 4.5 million new loans to individual consumers.
Goldman Sachs & Co.
TARP Funds Received |$10 billion
Company Statement | “We are grateful for the government’s extraordinary efforts and are pleased to be able to return to the U.S. Treasury the funds that were invested in Goldman Sachs,” CEO Lloyd C. Blankfein said.
TARP Funds Received and Paying Back|$10 billion
Company Statement | “Morgan Stanley is pleased to be repaying its $10 billion in TARP capital with an attractive return for taxpayers,” a company news release stated. “We believe this positive development reflects both Morgan Stanley’s strong capital position as well as the important systemic role the TARP program played in helping stabilize the U.S. banking system since the height of the financial crisis. After exiting the TARP program, Morgan Stanley will continue working closely with the Obama administration, elected officials, our regulators and our peers on the best possible framework to ensure the safety and soundness of the U.S. banking system.”
TARP Funds Received and Paying Back|$6.6 billion
Company Statement | “Today’s approval to repay the TARP capital reaffirms the value and strength of U.S. Bancorp’s diversified business mix and ongoing commitment to prudent risk management. We have successfully positioned the company to manage through this highly stressed environment, as well as to capitalize on future opportunities,” CEO Richard K. Davis said. “The repayment of the TARP capital will provide U.S. Bancorp with both independence and strategic flexibility, and we fully expect to continue to vigorously offer lending opportunities to our credit-worthy consumer, small business, corporate and institutional customers, invest for future growth and support the U.S. government’s overall efforts to stimulate the economy. Further, the funds we are now returning to the U.S. Treasury can be used to support other economic recovery efforts.”
Capital One Financial Corp.
TARP Funds Received and Paying Back|$3.55 billion
Company Statement | “In the coming weeks, Capital One expects to repurchase the $3.55 billion in preferred shares the company issued,” the company said in a news release.
TARP Funds Received and Paying Back|$3.39 billion
Company Statement | “American Express has met all the requirements of the [TARP Capital Purchase Program] and we believe that repurchasing our preferred shares at this time is in the best interest of our shareholders as well as good public policy,” CEO Kenneth Chenault said.
TARP Funds Received and Paying Back|$3.1 billion
Company Statement | “This is an important achievement for BB&T,” CEO Kelly S. King said. “Repaying the government’s investment will give us greater flexibility to benefit significantly from future opportunities that will be available as we emerge from this recession. In addition, we will become even more focused on the business of serving our clients, rather than dealing with government distractions.”
Bank of New York Mellon
TARP Funds Received and Paying Back|$3 billion
Company Statement | “This news will be welcomed by our clients around the world as well as by American taxpayers, who have realized a very good return on their investment in our company. We appreciate the support that the U.S. government provided to our industry and the overall economy at a critical time,” CEO Robert P. Kelly said.
The bank said it has raised $2.9 billion toward the repurchase of the $3 billion TARP capital investment through a $1.5 billion non-guaranteed five-year and 10-year senior debt offering and the sale of $1.4 billion in new common stock to the public.
State Street Corp.
TARP Funds Received and Paying Back|$2 billion
Company Statement | “We have consistently supported the objectives of the Capital Purchase Program and believe our participation in the program, as one of the nine banks asked to initiate it, has assisted the federal government’s efforts in stabilizing the financial markets,” CEO Ronald E. Logue said. “As a result of improving financial market conditions and our strong capital position, State Street has been able to replace the government’s CPP funds with private capital, in keeping with the Treasury’s original intent.”
Northern Trust Corp.
TARP Funds Received and Paying Back|$1.58 billion
Company Statement | “Northern Trust is one of the best-capitalized major banks in the industry and will remain so following our exit from the TARP Capital Purchase Program,” CEO Frederick H. Waddell said. “We supported the Capital Purchase Program as an important element in restoring stability to the U.S. financial system and acknowledge the taxpayers’ support of the financial system during these difficult times. Now we are pleased to return this capital in the best interests of our shareholders, clients, employees and taxpayers.”
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